Inland American REIT

The Inland American Real Estate Trust has become a problem investment for many investors of non traded REITs. Earlier this fall, Inland American announced plans to reset the value of its common shares to $8.03, down from the $10 that the shares initially sold for when launched a few years ago.

Inland made the announcement in an 8-K filing with the Securities and Exchange Commission (SEC) in September. In the filing, Inland offered no assurance that stockholders would able to resell their shares at the new estimated value.

Inland American cites the downturn in the economy for the declining value of its assets. For investors, however, that is of little comfort, leaving them to now wish they had invested their money elsewhere.

In recent months, a growing number of Inland American investors, as well as investors in other non-traded REITs, have complained that they were influenced to purchase shares in non-traded REITs by their broker/dealer, which characterized the products as a low-risk, conservative investment. Only now are investors learning otherwise.

Non-traded REITs, also called unlisted REITs, are far from conservative investments. Non-traded REITs are considered illiquid investments because they do not trade on a stock exchange. Getting into a non-traded REIT is easy; it's the getting out part that presents a problem. Non-traded REITs have a specific time frame in which investors are allowed to redeem their shares. Often, investors must wait up to seven or more years.

Non-traded REITs also come with high commissions and fees – up to 15%.
The market for non-traded REITs experienced a rough year in 2009. Many of the largest non-traded REITs – Inland American and Behringer Harvard REIT I among them – either slashed dividends to investors, shut down redemption programs or both.

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